Vector to pay $42M for accounting change
Vector Group said it has agreed to recognize gains on a transaction as income in a settlement with the Internal Revenue Service.
The Miami-based tobacco company said the settlement is in respect to a 1998 and 1999 transaction in which a Vector (NYSE: VGR) subsidiary sold three of its cigarette brands for a $294.1 million pre-tax gain in Vector's 1999 consolidated financial statements.
As part of the settlement, Vector said it agreed to recognize $87 million of the gain as income for tax purposes in 1999.
The company is to recognize the remaining gain of $192 million as income in 2008 or 2009, upon exercise of options.
Vector said it anticipates paying about $42 million, including interest, for the 1999 gain.
With the settlement, during the third quarter 2006, Vector said it will reduce excess reserve for income taxes payable by about $11.5 million.
Vector Chief Financial Officer J. Bryant Kirkland III said the settlement substantially reflects Vector's long-standing position on the amount and timing of tax payments related to the transaction.
"The company is more than sufficiently reserved for this scenario and, accordingly, will realize a benefit in the third quarter of this year," he added.
Shares closed up 17 cents to about $16.27. The 52-week high was $20.82 on Nov. 7. The 52-week low was $15.19 on June 28.
